Plethora of problems at the pump; solutions harder to find
In his April 30 address, Obama also announced that Attorney General Eric Holder would launch a task force to look for fraud or manipulations of oil markets by traders and speculators. However, a Risk.net article states that many who work on the market are unfazed by the possibility of investigation.
They always come to the same conclusion," said Philip Verleger, an economist and professor of management at the University of Calgarys Haskayne School of Business. "That there was no manipulation.
In the same article, Walter Zimmerman, senior technical analyst at United-Icap, says the price of crude oil is rising because of the weakening dollar.
Crude oil is priced in dollars and if the currency is losing purchasing power, anything youre trying to buy become more expensive, automatically and instantaneously, he said
According to CNN, a spike in oil prices preceded 10 of the 11 U.S. recessions since World War II. With Americans already spending nearly $400 a month on gasoline, many are beginning to cut back, which has a ripple effect across the economy.Bloomberg reports that higher prices have already sliced two-thirds of a percentage point from this years growth.
When the national average price of gasoline exceeds $3.20 a gallon, thats when we start to see indications of behavior change, Michael McNamara, vice president for research and analysis at SpendingPulse, told The New York Times. People pump fewer gallons and drive less, and that tends to have an impact on retail because people cut back on Saturday driving.
Some, including oil trader Dan Dicker, blame speculators for the rise in prices, saying they bet on poorly understood oil exchange-traded funds and therefore raise the price of gas.
There is no supply issue going on here, Dicker told AOLs Daily Finance. A whole bunch of people are pouring money into an oil market trying to take advantage of what they perceive to be a real risk in supply.
Uncontrollable circumstances such as the weather are also having an effect on oil prices. Recent tornadoes in the South closed seven refineries, and at CNBC, Richard Hastings, strategist at Global Hunter Securities, warns that a weak dollar combined with summer hurricanes could raise prices up to $6 per gallon.
All of these factors, plus unrest in the Middle East, may be impacting oil prices. However, Wall Street Journal columnist Kim Strassel writes that many of these arguments are being used as convenient bogeymen to distract from the Obama administrations de facto drilling moratorium in the Gulf.
Republicans on Capitol Hill have likewise targeted the drilling moratorium, which was put in place after the Gulf oil spill, as one of the major causes of rising oil prices.
The Heritage Foundation reports that while the moratorium has been lifted, permits are being issued at a 78 percent monthly reduction from the historical monthly average. On Thursday, Hornbeck Offshore Services, Pride International Inc. and Transocean Ltd., posted negative first-quarter profits as a result of the drilling moratorium.
Thursday, Republicans in the House passed the Restarting American Offshore Leasing Now Act, which is designed to speed up offshore oil and gas drilling. While some, including David Goldston at the Natural Resources Defense Council Staff Blog, believe additional drilling will have no impact on gasoline prices, statistics show that after President George W. Bush lifted the drilling moratorium on the Outer Continental Shelf in 2008, oil prices dropped from $145 per barrel to below $100 per barrel within two months.
Putting Americas resources on the table popped the oil bubble, writes Will Collier, which caused prices to drop. By Election Day in 2008, the price was at $70 per barrel.
With Obama currently enjoying a popularity boost after the death of Osama bin Laden, The Hill warns it may not be long before high gas prices eat away at the bin Laden bounce," dropping his approval ratings just as they did for Bush when gas prices rose in 2008.
You can talk all you want about Republicans and oil companies and OPEC, but consistent in American history, the price of gas lands on the presidents desk as a blame issue, Jeremy Mayer, an associate professor at George Mason University, told Politico. Itll be an albatross around his neck if its $5 by the election.
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